The International Herald Tribune estimated that U.S. investment banks and securities firms lost or wrote down over $66 billion in connection with the sub-prime collapse.

But actual losses may be far greater, and some analysts predict that the financial pain will continue well into 2008.

The financial stocks market was the worst performer in 2007 among the sectors featured on the Standard & Poor’s 500-stock index, falling 21 percent in share value. Individual companies fared even worse. Fannie Mae, Freddie Mac, Moody’s, Bear Stearns and Citigroup shares lost at least a third in value even as housing sales edged up a notch in November, according to The New York Times.

In an effort to shore up their capital bases, some companies, such as Citigroup and Merrill Lynch, are selling assets to foreign investors and contemplating further sales, a bail-out method that large firms have used in the past.

Merrill Lynch sold a $6.2 billion stake to the Singapore government, and an Abu Dhabi investment fund bought a 4.9 percent equity stake in Citigroup.

Jobs are likely to be hit as well. Merrill Lynch may cut up to 10 percent of its workforce, CNBC reported Wednesday.

The sub-prime fiasco took its toll on companies’ top brass, too. Citigroup and Merrill Lynch sacked their CEOs for poor risk management and Morgan Stanley’s top executive went without the customary end-of-year bonus.

When it comes to explaining who might be most at fault, opinions differ. Fortune magazine’s Shawn Tully attributes the debacle to an increased appetite on Wall Street for easy money. On the other hand, The New York Times’s Paul Krugman writes that the problem lies in Washington's aversion to market regulation, which gave Wall Street a free rein in a volatile market.

State Street Corp. is the latest institutional giant to take a hit in the sub-prime debacle, which has taken a heavy toll on Wall Street. State Street said Thursday it will lay aside $279 million to pay for lawsuits arising from losses suffered by its investment arm as a consequence of sub-prime-related exposure. The company also said its top investment executive, William Hunt, has resigned. Hunt will go without a bonus.

A turnaround in home sales in November failed to boost market confidence on the last day of trading in 2007. “It has been a disappointing year,” The New York Times quoted Tobias Levkovich, chief United States equity strategist at Citigroup, as saying. “The debt bubble burst and its ramifications were far wider than most people anticipated.”

A CNBC report quoted by MarketWatch said that Merrill Lynch may cut 1,600 jobs, which is around 10 percent of its workforce. It is also expected to write down as much as $10 billion from the fourth quarter.

Sub-prime-related losses are estimated to top $66 billion. Analysts fear additional write-downs are likely as data from the fourth quarter are released. As analysts lowered earnings predictions, the stocks of large investment banks declined sharply. Citigroup stock fell 41 percent over the course of the past year. The share prices of major U.S. securities firms also experienced sharp declines. Citigroup’s European investment chief, William Mills, said the bank lost more money on sub-prime-related investments than it had made. Its reputation is damaged, he added.

Troubled banking giant Citigroup sold the state-run Abu Dhabi Investment Authority a portion of the company worth $7.5 billion in November 2007. This was the latest in a string of Gulf nation investments made as the dollar tumbled and oil prices rocketed.

The Federal Reserve and four other foreign central banks said they would inject close to $64 billion in emergency short-term loans to banks in an attempt to alleviate the global credit squeeze. The Fed’s liquidity plan will establish a Term Auction Facility to dole out the cash and encourage close coordination with several foreign central banks. According to MarketWatch’s Greg Robb, it is an admission by the Fed that its prior strategy of cutting interest rates did not buoy credit markets.

Coordination among central banks is a rare event, writes CFR's Lee Hudson Teslik in an article on Dec. 19. He was commenting on the announcement a week earlier by the U.S. Federal Reserve, the European Central Bank and three other major banks that the institutions will work jointly to find a solution to the global credit crunch. Meanwhile, the Fed said it will establish an auction facility that will distribute short-term, fixed-rate emergency loans to banks. Reactions were mixed. Martin Wolf of the Financial Times saw the move as a sign that central bankers are worried. In a more sanguine vein, CFR's Roger M. Kubarych described the news as a "win-win situation" and "a confidence builder.” He said central bankers' actions dramatically reduce the chances of another bank run. Britain saw its first bank run in 100 years last year when Northern Rock began to founder.

Economic forecasts are difficult to make, as Wall Street amply demonstrated by betting on sub-prime mortgage-backed securities. “Anybody who says they weren’t surprised this year is a liar,” Joshua Shapiro, chief United States economist at the research firm MFR, said for The New York Times. Investors should be skeptical of economic forecasts, said Brian Gendreau, investment strategist at ING Investment Management. His company’s actual performance bears little resemblance to what was predicted, he added. Some analysts predict a recovery in the financial markets in 2008.

Big investment banks, such as Citigroup and JPMorgan Chase, will continue to feel the effects of the credit crunch well into 2008, according to an NYT blog. Goldman Sachs analysts quoted in the blog predicted that Citigroup and JPMorgan Chase may have to write down far more in assets than previously estimated.

A special report by Fortune magazine says the sub-prime crash is shocking in that it hit some well-established, respectable players, but it was hardly unpredictable. The norm on Wall Street, according to Fortune magazine’s Shawn Tully, is that it “always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money.” Tully quotes Tiger Williams, CEO of Williams Trading, who said, "The fee engine becomes so huge that these products take on a life of their own. Everyone rationalizes that it's safe because they're making so much money. But it's far from safe."

New York Times columnist Paul Krugman attributes the sub-prime meltdown to Washington’s aversion to government regulation. He writes in an opinion piece of Oct. 26 that Wall Street was given a free rein because “this was the way the laissez-faire ideologues ruling Washington—a group that very much included Mr. Greenspan—wanted it. They were and are men who believe that government is always the problem, never the solution, that regulation is always a bad thing.”

A critique published by the CATO Institute blames the Federal Reserve for catering to irresponsible investors, who expect to be bailed out when the times get rough. Author Gerald P. O'Driscoll Jr. says the Fed’s monetary policy helped bring about the recent sub-prime crisis and called it a “moral hazard.”

The mighty came tumbling down because of they made financial instruments so complex, according to a New York Times blog. Some financial instruments have grown so intricate that there is hardly anyone left on Wall Street who understands them completely, including their own creators. (Well, with the exception of Goldman, of course.)

Growth in most sectors of the economy in 2007 rewarded small investors, even as large financial players suffered losses related to the sub-prime mortgage slump. Private investors are barred from buying into the riskier financial instruments—the instruments were the undoing of big players, such as Fannie Mae, Bear Stearns, Moody’s and Citigroup, according to an article by The New York Times. In a surprising reversal of an established trend, “Main Street” investors came out on top while brokers’ profits declined.